Child benefit reform 'virtually unenforceable', Tory MP warns

The planned reform of Child Benefit would be ''virtually unenforceable'', a
senior Tory MP has warned.

8:51AM BST 29 Oct 2010

Ian Liddell-Grainger, chairman of the all-party parliamentary group on taxation, said the move to withdraw the benefit from couples where one earner pays higher rate tax would not be practical until HM Revenue and Customs was able to process real-time information.

Ian Liddell- Grainger

Ministers had dismissed as ''nonsense'' reports that even the Treasury feared the proposal was unworkable because it relied on partners or spouses being forced to declare each other's earnings.

There were also reports that HMRC was working on a system of retrospectively ''fining'' higher rate taxpayers who failed to disclose their true child benefit situation by changing their tax code.

Mr Liddell-Grainger told BBC Radio 4's Today programme: ''One of the big difficulties the Government has got is that the system they have got is not a real-time system and therefore this is going to be virtually unenforceable. Until we go to real time taxation this is going to be a very difficult position.''

He added: ''I think it could be introduced as planned, the problem is it doesn't always mean it's going to work.

''Government has always had problems with IT projects and this is no different.''

He went on: ''If your circumstances change they will not be able to enact it in real time. The ramifications for getting it wrong are enormous for the taxpayers and the citizens of the UK.''

The MP said: ''Why is the citizen going to volunteer the information, because it's not going to be worth their while, there's no guarantee it can be enacted and people want their privacy respected.''

He recalled recent problems with the PAYE system, with millions of taxpayers wrongly taxed, and added: ''If we can't get PAYE right, we are not going to be able to do this.

''Until we have online tax filing and real-time taxation the system is going to creak and it may well fail and we go back to the problem that the citizen loses confidence in the state.''

A Treasury spokesman said: “Withdrawing child benefit from higher rate taxpayers will be done through existing systems and processes. The tax system already asks higher rate taxpayers for information about things like interest received on savings accounts, in order to ensure the right amount of tax is paid. This is just an additional piece of information HMRC will ask for and it will be the higher rate taxpayer’s responsibility to report it to HMRC."

The Government's welfare shake-up was also at the centre of a continuing row over plans to cap housing benefit, after London Mayor Boris Johnson vowed not to accept ''Kosovo-style social cleansing'' in the capital.

He later said his comments had been taken out of context, but they earned a rebuke from No 10 and senior Liberal democrats including Deputy Prime Minister Nick Clegg.

Tory MP for the Cities of London and Westminster Mark Field said today he supported the housing benefit cap and would not have used the phrase ''social cleansing''.

He told BBC Radio 4's Today programme that about 5,000 households in his constituency would potentially be hit by the benefit cap, but he also believed many of their rents would be lowered.

He added: ''I believe that the coalition are absolutely right to grasp the nettle on this and I support the cap.''

Mr Field, asked about the Mayor's comments, said: ''Social cleansing is not a phrase I would have used.''

He said the experience of genuine victims of ethnic cleansing ''can't really be compared with what's being proposed''